Mentor CEO: Foundry fears oversupply

Although 2011 global semiconductor sales revenue is expected to grow by 7.2%, Mentor Graphics CEO Walden Rhines warned that you have to pay attention to whether this growth momentum can still be maintained in 2012.

The revised version of the forecast issued by IHS iSuppli states that global semiconductor sales revenue will increase from US$304.1 billion in the previous year to US$325.9 billion in 2011. The agency’s forecast released in April this year stated that chip sales revenue this year would have to grow by 7%.

"I still have some worries about the economic growth of the next year because the capital expenditures of foundries in 2010~2011 are already high, and there may be an oversupply situation," said Rhines.

Rhines pointed out that compared with the past two years, the capital expenditures of the foundries including TSMC, GlobalFoundries and Samsung Electronics have doubled. “Therefore, people do not expect that the foundry will have capacity utilization rate of 95% in 2010. On the contrary, since many new production capacity will be opened gradually since the second half of 2012, people will expect the capacity utilization of the foundry since 2012. Will be reduced."

The overall decline in capacity utilization among foundries will cause wafer prices to fall. The falling wafer costs will further drive down semiconductor prices, Rhines said.

However, although the foundry may begin to lower prices to reflect the decline in capacity utilization, equipment suppliers are unlikely to follow suit, Rhines said. However, this trend may lead to a reduction in the total effective market (TAM) of the semiconductor industry, Rhines said.

"Even if unit shipments increase, semiconductor TAM will still decrease in the event of a price decline," said Rhines. "This is the case where the semiconductor industry continues to repeat itself. At this point in time, everyone is worried whether the industry will suffer a price drop in the second half of 2012.

However, all the downward pressure on prices will eventually be overcome by the hugely growing emerging areas such as mobile communications equipment, automobiles, and security applications, Rhines said.

"But the problem is that you have doubled your foundry investment, and memory investment is relatively modest. Therefore, I expect Fabless to have sufficient capacity in the second half of next year, but relatively speaking, the Fabless factory also There may be price competition,” Rhines said.

"However, as long as the overall economy continues to grow, this situation will not last long," Rhines said. “Prices will fall right, but people will buy more products and they will launch new designs; eventually, they will find that because the products are cheaper, they can also try more new applications and eventually create new markets. And promote industrial recovery.